Globalstar Files for Chapter 11

Published 8:00 pm, Thursday, February 14, 2002

Satellite telephone provider Globalstar LP filed for bankruptcy protection Friday after reaching a deal with major creditors to restructure the company's debt.

The Chapter 11 filing in the U.S. Bankruptcy Court in Delaware will help facilitate the restructuring, the company said.

Globalstar, which claims 66,000 customers, said it plans to continue providing service. It has about $46 million in cash. The company could not immediately say what its total assets were. Its filing listed liabilities of about $3.4 billion.

"This filing is an important first step in establishing a new Globalstar with renewed credibility, enabling it to address new business opportunities and to further broaden our customer base," said Olof Lundberg, Globalstar's chief executive.

Globalstar spent more than $4 billion to develop its system of 48 satellites that let subscribers make and receive calls from anywhere on the planet.

As with rival Iridium LLC, Globalstar signed up fewer customers than expected because of large handsets and expensive service. Iridium filed for bankruptcy protection in 1999.

Globalstar halted payments on $3 billion in debt in January 2001 in an effort to stay afloat into 2002.

Last November, the company warned it was likely to file for bankruptcy protection.

Under the restructuring plan, which must be approved by the bankruptcy court, a new Globalstar company will take ownership of all of the existing partnership's assets.

The new company, which will initially be owned by Globalstar LP's bondholders and other unsecured creditors, also will acquire all equity stakes in three of its service providers originally held by Vodafone and Loral.